How Luxury Retailer Saks Courts the 1 Percent

It’ll surprise no one demonstrating in Zuccotti Park to learn that the 1 percent is spending confidently, even as the country as a whole braces for a possible double dip recession.

The National Retail Federation predicts overall retail sales will grow an anemic 2.8 percent this holiday season, but some luxury retailers have a brighter outlook. Take Saks, owner of Saks Fifth Avenue and Saks.com, which expects sales growth this year of 8 to 9 percent, according to CEO Stephen Sadove.

The company will achieve those numbers with the help of a growing arsenal of digital marketing tools, including Facebook marketing, more agile use of customer data, and evolving e-commerce tactics.

Speaking at an event held by the Society of American Business Editors and Writers last week, Sadove said, “The Internet is now an integral part of our marketing program and the work we do with vendors.”

For example, Sadove said the company has merged store and Internet shopping data and is now using the combined purchase behavior to market to regular customers based on that history. If someone buys cosmetics only online, a sales rep might alert her to a new eyeliner product available through the website, for example.

The web has also allowed Saks to make more aggressive use of drop shipping, a supply chain practice that lets a retailer ship to consumers directly from a vendor so it doesn’t need to keep the goods in stock. By expanding its catalog, Saks can generate higher sales and better compete with large online luxury retailers like Gilt Groupe.

“You can have a limited number of categories in-store,” Sadove said. “Through drop-ship you can get into businesses you couldn’t get into otherwise.”

A Saks rep declined to elaborate on what types of products it has added to its website that are not being sold in stores, but Saks.com has several categories – for instance sports memorabilia – that weren’t on offer in 2008, according to the Wayback Machine, a service of Archive.org that maintains a database of archived web pages.

Going forward, Sadove suggested Facebook will play a key role in the company’s marketing efforts. “I’m absolutely convinced that the use of social media and advertising …has an important role to play in the behavior of the consumer.”

He continued, “So much of how consumers shop is via recommendation of friends. Tapping into the recommends is enormously important.”

Sadove stopped short of describing the company’s specific plans around social, but Facebook has lately taken steps to achieve what he is hinting at by bringing online shopping activity into its user experience. Earlier this month it unveiled a partnership with GSI Commerce that will allow the eBay-owned e-commerce enablement company and its 180 major clients including American Eagle Outfitters and Dick’s Sporting Goods to add “Want” and “Own” buttons to their sites. Additionally, 100,000 retailers worldwide on eBay’s Magento e-commerce platform will also have access to the social buttons.

Saks has shifted its marketing tactics this holiday – cutting back on the hefty promotions and steep discounts it leveraged in 2009 and 2010, when fallout from the 2008 financial meltdown was more strongly felt – at least by the wealthy.

“Over the last six months, the best selling has been at the higher price point,” he said. “My average order size has actually gone up. But it’s not because the price of X commodity has gone up. It’s because people have gravitated more toward the special goods. It’s very different from what you’re seeing at the low end of the market.”